Real estate: hidden opportunities waiting for savvy investors

Slovenian real estate market in a nutshell: the worst is over and the market slowly recovers. At the moment the market offers numerous opportunities as a direct result of the crisis, ranging from unfinished projects or empty building slots at prime locations for bargain prices, to hotels, flats and industrial buildings held by the BAMC.

It seems that the worst is over. The prices have stopped falling and are more or less stable. According to the Global Property Report the average price of a square meter is up by 0.79 percent in 2015, on a year to year basis. Rents also remain stable with a gross rental yield of 4.37 to 4.84%.

Prices are still 19 percent below the levels reached five years ago. The real estate prices inflated to unrealistic heights between 2005 and 2008. After a long and continuous decline they seem to have obtained a stable level in the last period.  As the Bank of Slovenia's Financial Stability review points out »the fall of the real estate prices has been accompanied by the increased segmentation of the market«. The volume of trade is also slowly building up -. Yet two third of the real estate transactions represent the sale of used flats.

Realtors also report on growing interest from international buyers, especially the British, who are traditionally the number one buyer of Slovenian property. In Spring UK's the Daily telegraph featured Slovenia as one of Europe's new second home hot-spots offering beautiful scenery at bargain prices.

So far foreign investors have been almost exclusively interested in holiday homes. The interest of global real estate players in Slovenia's market has been scarce so far. The recent financial crisis has decimated the number of local investors as well: the top construction industry players in Slovenia had more or less collapsed. Over-indebted local developers have found themselves in serious turmoil: many went out of business, others struggled and were forced to put a halt to projects already underway. One of the consequences is that there are many unfinished (or even unstarted) investment projects, especially in Ljubljana. These projects and plots are now available, often at bargain prices.

Take Šumi for example, a location just across the street from Slovenian National Theatre building in the very center of Ljubljana. A local financial company KD Group managed to prepare a project combining residential, commercial and business premises. The investor managed to clear up the old buildings on site and obtain licenses as the market collapsed. Another example, a Bel Vie project to build condominiums with some 200 high standard flats in the Šiška quarter near Ljubljana’s Tivoli Park. A large foundation hole was dug before the investor went bankrupt. A sizeable plot around the capital’s railway station has been cleared up and prepared for Emonika, a new railway and bus station together with a high rise that was to house a hotel, commercial, business and residential areas. The investor - a Canadian company Trigranit – pulled out after the financial crisis in 2008. The project remained unfinished. The largest investment project in Ljubljana in the last decade was Stožice Stadium Sports center – the stadium has been in use for some years now, but the planned commercial center remains unfinished and empty. All these projects – and many more – are now waiting for new investors.

Another set of investment opportunities could be found in the portfolio of the Bank Management Asset Company. BAMC took over a number of hotels, industrial buildings, and also around 2.000 brand new flats. All this property will sooner or later end up on the market – yet not at the same time and – as BAMC representatives often stress, at market prices. Some investors have already recognized the opportunities offered by the post-crisis Slovenian market. A typical example could well be Serbian large group Delta, who are planning to build a five star hotel in Ljubljana. More examples of new investment projects will be revealed at the Slovenian Real Estate Forum held in late September in Portorož.

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